CA Court Interprets Defenses in Pregnancy Discrimination Case

By Anne C. O'Donnell

The First District Court of Appeals in California issued an opinion on
December 10, 2012 which will be helpful to employers and employment law
practitioners in understanding certain jury instructions and defenses to claims
of pregnancy discrimination, specifically the business judgment rule and an
employer's claim that an employment decision was made based on avoiding a hazard
to a pregnant woman. The decision is also significant for its mention of an
issue currently pending before the California Supreme Court on the question of
whether the "mixed-motive" defense applies to FEHA claims.

The case arises out of claims made by Plaintiff Julie Gilman Veronese, who
sued defendant Lucasfilm, Ltd. (Lucasfilm), alleging six causes of action. After
three days of deliberation, the jury found for Plaintiff on three of the claims
-- pregnancy discrimination, failure to prevent pregnancy discrimination, and
wrongful termination in violation of public policy. The jury found for Lucasfilm
on the other two claims--retaliation and failure to accommodate disability. The
jury awarded Veronese $93,830 for past economic damages and $20,000 for
noneconomic damages, a total of $113,830. The trial court later awarded Veronese
$1,157,411 in attorney fees.

The facts alleged in the case are extensive, and the court discusses them in
great detail. Essentially, and according the court's recitation, Plaintiff
was offered a one month consulting gig as the assistant to the estate manager of
Mr. Lucas' property, presumably as a trial to determine if she was suitable for
a permanent position. Following the offer, Plaintiff advised the estate manager
that she was pregnant.

Several communications between the parties took place over the next several
weeks, which included: 1) Plaintiff advising that she was not feeling well due
to her pregnancy and the estate manager telling her to take time for her health
and that the job would be there for her; 2) the estate manager conveying that
she was excited for Plaintiff when advised that Plaintiff was having twins; 3)
several check in emails from both sides and the estate manager expressing that
she was overworked and needed to figure out the scheduling and her own vacation;
4) Plaintiff advising that she had miscarried and lost one of the twins and the
estate manager expressing concern for her; 5) discussion of a new start date; 6)
the estate manager advising that the one month project was now shortened to 3
weeks "because they were being sensitive to [Plaintiff's] situation; 7)
Plaintiff questioning whether changes were being made because of her pregnancy
and that she was feeling that the estate manager no longer felt she was a good
fit for the job; 8) the estate manager's response that the decision was due to
other factors including stress at the position, her inability to take vacation,
and that Plaintiff's claim that changes were being made due to her pregnancy
were not true.

After several more communications, Plaintiff and the estate manager concluded
that the position was not going to work out, although the specific facts were
disputed as to what was said. Eight days later, the estate manager hired another
person for the position.

Appeal by Lucasfilm

Lucasfilm appealed from both the judgment and the fee award, arguing that the
court made several errors in the jury instructions given and that the damages
had no support in the record.

The CA Court of Appeals agreed that the lower court erred in its
instructions, reversed the judgment and vacated the $1,157,411 fee award.

"Business Judgment" Rule

Lucasfilm proposed special instruction no. 9, as follows: "You may not find
that Lucasfilm discriminated or retaliated against Julie Gilman Veronese based
upon a belief that Lucasfilm made a wrong or unfair decision. Likewise, you
cannot find liability for discrimination or retaliation if you find that
Lucasfilm made an error in business judgment. Instead, Lucasfilm can only be
liable to Julie Gilman Veronese if the decisions made were motivated by
discrimination or retaliation related to her being pregnant."

The trial court refused to give this instruction.

The Court clarified that plaintiffs in discrimination cases have the burden
to prove discrimination, and not just that an employer's decision was "wrong,
mistaken, or unwise."

The rule to remember is thus: "The employer may fire an employee for a good
reason, a bad reason, a reason based on erroneous facts, or for no reason at
all, as long as its action is not for a discriminatory reason. . .the relevant
question is. . .whether the given reason was a pretext for illegal
discrimination. The employer's stated legitimate reason. . .does not have to be
a reason that the judge or jurors would act on or approve."

The Court noted, however, that Lucasfilm had not cited, and it had not found,
any California case discussing this principle in connection with a jury
instruction in a FEHA case.

Moreover, the Court clarified that even if the proposed instruction has
excess language, the solution is to cross out such language.

As such, the Court of Appeals concluded that the refusal to give the business
judgment instruction was error.

Avoiding Hazard to Pregnant Women

Plaintiff proposed and the trial gave an instruction that said, "A potential
hazard to a fetus or an unborn child is not a defense to pregnancy
discrimination."

The court looked to the case Automobile Workers v. Johnson Controls, Inc.
(1991) 499 U.S. 187, which Plaintiff cited as authority for giving the
instruction. In that case, the U.S. Supreme Court held that an employer's policy
that women who were pregnant or capable of having children would not be placed
into jobs involving lead exposure "explicitly discriminates against women on the
basis of their sex."

The Court distinguished this case, saying that here Lucasfilm had no such
policy, no policy was involved here, and only one 36-year-old pregnant woman who
had already miscarried one twin. Further, the Court noted that Lucasfilm was not
making a claim that its concern for the fetus was a defense to its decision.

Thus, although the instruction was "abstractly correct as a statement of law,
it is not within the issues developed by the evidence or reasonable inferences
therefrom."

"Put otherwise, the instruction could be interpreted as telling the jury that
any potential hazard to an unborn child is necessarily irrelevant to the
employer's legitimate decisionmaking. That cannot be, as Johnson Controls itself
acknowledged: "It is correct to say that Title VII does not prevent the employer
from having a conscience. The statute, however, does prevent sex-specific
fetal-protection policies." (Johnson Controls, supra, 499 U.S. at p. 208.)"

The Court therefore concluded that giving of the instruction was error in
this case.

The Court did not decide one argument put forth by Lucasfilm that the giving
of the instruction conflicted with the provisions of Government Code section
12940, which provides: "This part does not prohibit an employer from refusing to
hire or discharging an employee with a physical or mental disability, or subject
an employer to any legal liability resulting from the refusal to employ or the
discharge of an employee with a physical or mental disability, where the
employee. . .cannot perform those duties in a manner that would not endanger his
or her health or safety or the health or safety of others . . . ."

Declining to address this issue, the Court stated: "We need not decide the
issue, but do note that the case did not involve an "employee's inability to
perform a particular job efficiently and safely due to a physical handicap or
impairment."

Procedural Error in Instructions

For some reason, the trial court apparently did not give an instruction on
the claim for failure to prevent discrimination and on the difference between
the termination from the temporary position and the failure to hire for the
permanent position. The Court noted that the judge began instructing the jury on
this cause of action, but was interrupted by counsel, and then never resumed
with the instruction.

Finding that it is "the duty of the court to see that jurors are guided on
controlling legal principles, and the complete failure to instruct properly on a
basic issue may be reversible error." See, Thomas v. Buttress & McClellan
(1956) 31 141 Cal.App.2d 812, 819. The court concluded that the trial court had
erred.

Instructional Errors Were Prejudicial

Instructional error in a civil case is prejudicial "where it seems probable"
that the error "prejudicially affected the verdict," said the Court.

The Court set forth the test that should be employed in assessing whether a
miscarriage of justice has occurred: “The reviewing court should consider not
only the nature of the error, including its natural and probable effect on a
party's ability to place his full case before the jury, but the likelihood of
actual prejudice as reflected in the individual trial record, taking into
account "(1) the state of the evidence, (2) the effect of other instructions,
(3) the effect of counsel's arguments, and (4) any indications by the jury
itself that it was misled."

The Court concluded that such miscarriage of justice occurred here, and that
the cumulative effect of the errors supported such a determination.

Causation Issue Pending Before the CA Supreme Court

Lucasfilm argued that the appropriate test for causation is the "but for"
test and that FEHA imposes liability “because of” discrimination under Gov. Code
section 12940(a), and "because of" means that Plaintiff had to show that
discrimination had a determining effect--was a "determining factor"--on the
employment decisions.

The issue is currently before the CA Supreme Court, in
Harris v. City of Santa Monica, review granted Apr. 22, 2010, S181004. The
lower court held that giving only CACI instruction 2500 in a pregnancy
discrimination case was error, as a "mixed motive" defense remains available to
employers in appropriate circumstances.

The mixed motive defense is based on BAJI Instruction 12.26, which states:
"If you find that the employer's action, which is the subject of plaintiff's
claim, was actually motivated by both discriminatory and non-discriminatory
reasons, the employer is not liable if it can establish by a preponderance of
the evidence that its legitimate reason, standing alone, would have induced it
to make the same decision."

The Court here concluded that it was unnecessary to reach this issue, because
reversal was required due to the errors in instructions that were prejudicial.

The
CA
Supreme Court heard oral argument in Harris v. City of Santa Monica on
December 4, 2012 on the issue of whether the "mixed-motive" defense applies to
employment discrimination claims under the Fair Employment and Housing Act, and
the case has been submitted.

Keep an eye out for the decision in the Harris case, as it will have an
important effect on discrimination cases, for employers and employees alike.

Anne O'Donnell is a recovering litigator who is now currently a Senior Writer
for legal professional content at Findlaw.com. She practiced for 10 years in
civil litigation in San Francisco.